Errors/Omissions Insurance questions
Errors/Omissions Insurance questions
(OP)
I'm in the final stages of sparking up an independent consulting gig, (civil) for which I will occasionally have to stamp design documents.
I don't know much about E&O insurance, except that A) I need it, and B) the rates for it usually vary based on how much revenue you bill annually.
Questions:
1) are E&O insurance rates based on stamped revenue, or total revenue? I plan to do a lot of work that doesn't need a stamp on it.
2) who are some good E&O insurance providers to contact, when shopping around?
Thanks in advance.
I don't know much about E&O insurance, except that A) I need it, and B) the rates for it usually vary based on how much revenue you bill annually.
Questions:
1) are E&O insurance rates based on stamped revenue, or total revenue? I plan to do a lot of work that doesn't need a stamp on it.
2) who are some good E&O insurance providers to contact, when shopping around?
Thanks in advance.
RE: Errors/Omissions Insurance questions
More importantly even for the same revenue every year, the premium will keep going up every year as the risk of all the work you do keeps get adding up. You have to have the continuous coverage of all the work you do for years to come (as long as the policy need to remain valid). If you have a break in coverage, you loose coverage of everything and a new policy will only cover the work beginning its effective date.
Remember your exposure to a claim still remains even if you retire. You may want to seek some professional advice from an attorney experienced in this field.
2) Find a professional insurance agent in your area through www.plan.org and talk to them.
Rafiq Bulsara
http://www.srengineersct.com
RE: Errors/Omissions Insurance questions
Few Engineers handle rejection very well because mostly we don't get rejected for stuff. In this area you need to prepare yourself for rejection. I had 25 underwriters reject my business before I found one that would cover me. It may not be so bad in Civil as it was in Oil & Gas Facilities, but it probably won't be a cake walk either. The insurance through ASME and SPE both rejected my application because they didn't feel that they had adequate experience in my field (that's right, a policy through the Society of Petroleum Engineers doesn't feel they know enough about Oil & Gas).
Good luck with your new business.
David
RE: Errors/Omissions Insurance questions
RE: Errors/Omissions Insurance questions
That Prior Acts coverage is what my underwriter calls a "Bridge Policy", but my guy wanted about half the basic policy amount the first year (with the promise that it would go down each year till the Statute of Limitations was reached).
David
RE: Errors/Omissions Insurance questions
Good luck with the business.
Ron
RE: Errors/Omissions Insurance questions
A very large amount of the stuff I'm going to end up doing, if this goes the way I think it will go, is zero liability stuff. Stuff for which I basically cannot be sued. Education, expert testimony, blah blah. Stuff I wouldn't even bother carrying an E/O policy for.
But on the off chance I run into something where I would need to be covered, I'd like to not assume liability myself. It makes no sense to pay E&O on work that's 90% un-sue-able. I'd pay more in insurance than the work I'm doing to pay for the insurance, and be better off doing less work.
Can I set up two companies, and due insured work with one, and uninsured work with the other?
RE: Errors/Omissions Insurance questions
Yes, you can.
Or you can start a new company each year and dissolve it at the end of the year. It's a trick done by some engineers who work in industries that are virtually uninsurable. DERs are one example. They approve data on behalf of the FAA for modifications to commerical airplanes. Insurance is unaffordable for the kind of work they do.
Cedar Bluff Engineering
http://cedarbluffengineering.webs.com
RE: Errors/Omissions Insurance questions
Rafiq Bulsara
http://www.srengineersct.com
RE: Errors/Omissions Insurance questions
RE: Errors/Omissions Insurance questions
Rafiq Bulsara
http://www.srengineersct.com
RE: Errors/Omissions Insurance questions
So outside of general life advice, do you have any anecdotes or experience with what I'm talking about to share, Rafiq?
Photoengineer: Seems to me that if you shut a company down and started another to save yourself insurance costs, you'd still be on the hook for bridge coverage, as discussed above.
RE: Errors/Omissions Insurance questions
And once you ask in a public forum, you have opened yourself to all kinds of responses, whether or not you like them or agree to.
If you want real and legal advice, which you ought to do, ask an attorney or two. Members here are a bunch of engineers and most of us consulting engineers carry E/O insurance as far as I can tell.
As far as suing goes, you do not have be wrong to get sued and proving innocece can also be very costly. Lawyers always goes to the bank laughing, whether you win or lose.
Also it does not matter what you think is sueable, as it is not up to you to decide who can sue you. Everyone who gets sued, always believed they could not be sued.
Rafiq Bulsara
http://www.srengineersct.com
RE: Errors/Omissions Insurance questions
No, I seriously doubt I'll be sued for spending a day teaching fluid mechanics for Continuing Ed credits, and even if I did, there's no way I'd pay for E/O for teaching.
No, I seriously doubt I'd be sued for providing legal testimony for another lawyer during a lawsuit, and even if I did, there's no way I'd pay for E/O to cover my expert testimony.
No, I have absolutely not "already decided" anything. I am in the middle of deciding whether to either:
A) get a 2nd mortgage on my house to cover the expenses of starting my own business, or
B) reduce my scope of services with the new business, or
C) start two new businesses to sufficiently differentiate between the scope of services provided, or
D) make arrangements with friends so that I outsource some services to them
I'm sorry if my predicament bothers you, sir, but it's a reasonably important decision in my life, and there's no reason for you to be so hostile. If you're going to continue on like this, I'd appreciate it if you'd take a few seconds to click the "turn off email notification" button in the bottom left corner, and save us both some time.
Thanks in advance.
RE: Errors/Omissions Insurance questions
Rafiq Bulsara
http://www.srengineersct.com
RE: Errors/Omissions Insurance questions
RE: Errors/Omissions Insurance questions
My suggestion is to get the insurance, deal with the fact that the premiums are based on gross fees, institute a quality assurance program (even if you practice alone), document all that you do, understand and CRITICALLY review your contracts (look for poor indemnification clauses, limitation of your liability, standard of care, ownership of documents, etc.), and assume that everything you produce will, at some point, be critically reviewed by an attorney and his engineering expert.
Good luck.
Ron
RE: Errors/Omissions Insurance questions
But if I get hired to teach, or do a peer review, or provide legal testimony, or manage LEED paperwork, then those are activities that aren't going to spill over into design work, so paying E/O insurance for doing those activities is dumb. And if those activities are the majority of my work, it may be more cost effective to simply narrow my scope of services and not bother with insurance at all. That's the break point I've got to get my head around moving forward.
RE: Errors/Omissions Insurance questions
Just trying to show that no type of job is invulnerable...
Dan - Owner

http://www.Hi-TecDesigns.com
RE: Errors/Omissions Insurance questions
If the answer is "yes" then that's important info to get on the table!
:)
RE: Errors/Omissions Insurance questions
No, professors don't carry E&O insurance unless they do consulting on the side. There is an implicit indemnification of professors for what they teach, without regard to how bad it might be.
I taught for 5 years at the university level and while I had insurance, it was not a consideration in teaching.
I have seen experts get zapped. You can't hold yourself out as an expert and then do stupid things,thinking you're immune to liability. Just recently, a retired engineer provided an opinion in court on an engineering issue. He was wrong and did not reactivate his license to offer the opinion in public court....a violation of state law in the area in which he offered the opinion. The client is pursuing.
As for expert witness work, it isn't usually the opinion that gets you in trouble, but if you are negligent in obtaining the information upon which those opinions are based, you can be embarassed at the least and sued at worst. I do structural and construction forensics, so I know this arena reasonably well.
All in all, though, expert witness work is relatively low liability work. You're more likely to damage your reputation than your bank account.
Ron
RE: Errors/Omissions Insurance questions
RE: Errors/Omissions Insurance questions
We have been sued a couple times, but we've never paid a dime because the lawyers don't see the money in it if there is no insurance.
If you are doing small work, have a good contract, do good work, and tell clients you are self-insured.
www.idecharlotte.com
RE: Errors/Omissions Insurance questions
Then again, the stakes are really high if they decide you *are* worth suing anyway.
Mostly I'd want insurance as a down payment / retainer for a lawyer, as much as anything else.
I thank you all for the input so far, and will continue to monitor the thread. Clearly next step is to talk to a lawyer in a little more detail, then talk to an insurance broker or two.
Do you guys have any more recommendations for insurance brokers? Does this website support private messages?
RE: Errors/Omissions Insurance questions
RE: Errors/Omissions Insurance questions
This is ridiculous. Is there some sort of a lobby pushing for affordable E&O Insurance for small firms? Our state has an insurance division and if other state departments want smaller firms and lower billing rates, they should concurrently be seeking lower insurance premiums and more competition. This is not an engineering problem; this is an insurance problem. Any thoughts on a lobbying effort?
RE: Errors/Omissions Insurance questions
Here's the story in Land Development:
Economy crashes.
Many large engineering firms lay off 80% or more of their staff.
Included in that 80% are most of the people who actually know how to engineer, as opposed to the CEOs and client managers and (many) project managers who haven't actually engineered anything in a decade, who are largely retained.
This puts a glut of good engineering talent in the market, engineering talent that largely knows that they can do a job for a x2 or x1.5 multiplier out of their home and undercut the fat cats who fired them.
This good engineering talent bands into small firms, lowballs some bids, and monopolizes the first round of work post-crash, further screwing the older established firms.
Some of those small firms do good work, do well, and are now growing. Some of them screw things up, and then the clients begin to realize that they're uninsured, or poorly insured. Maybe something fails, maybe rumor of it gets spread around, and now the clients get worried.
The next phase of the story is the one we're in now. You have clients who want work done for the prices that the Kitchen Table firms can do, but they want established firms with 2 million or more in insurance coverage to do it. And they can often get it, because those established firms are so strapped for work they'd rather work at a loss than close shop. They're still buying work. Bidding out of fear.
I wouldn't mind seeing an entirely new E&O model arise, where each job is individually insured, instead of insuring the firm itself. That makes the most sense from a business standpoint. I suspect the insurance companies are not set up this way though, and I doubt they'd want to change, considering how much money they make now.
RE: Errors/Omissions Insurance questions
Can you get a project specific rider for a larger project? That way, you can still keep your lower limit, but you could bill the higher coverage as an expense to the DOT, or build that premium into your fee. I have heard there are some carriers around that do this, but they are hard to come by.
Is that an option? You could maybe get a quote from a carrier to show the DOT you are serious, and tell them you will get the coverage once you are awarded the project.
RE: Errors/Omissions Insurance questions
I realize in some cases companies are forced to have it.
Richard
www.led-inc.com